Mediation and strategic delay in bargaining and markets

Kerry Back and Paul Barton

Journal of Economic Dynamics and Control, 2022, vol. 141, issue C

Abstract: Mediator proposals can accelerate agreement and increase welfare even if the mediator is entirely uninformed. We demonstrate this by adding random mediation to the Cramton (1992) bargaining model. Mediation increases welfare by pooling types, which reduces signaling costs. Size discovery mechanisms in financial markets, in which traders can trade at a frozen price, are analogous to mediator proposals and may increase gains from trade in markets in which traders are reluctant to signal trading intentions by posting limit orders.

Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:141:y:2022:i:c:s0165188922000811

DOI: 10.1016/j.jedc.2022.104377

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